San Gabriel Valley Engineering Giants Regroup for Economic Recovery

In retrospect, Ed Lorenzen says today, he should have known things were not going well at the Pasadena-based engineering company where he was working in 1982.

"We should have seen the handwriting on the wall," said Lorenzen, a project engineer. "We started losing little benefits. They cut our vacation. The coffee pots started disappearing from the counters."

Lorenzen's employer, Jacobs Engineering Group Inc., was plunging into the worst slump the engineering and construction industry has faced since the Depression. Within a few months, Lorenzen was laid off from his $47,700-a-year job and was collecting $166 a week in unemployment insurance.

Lorenzen, 49, said his dismissal after eight years with the company came as no surprise, but it did hurt. "I felt a bit of resentment," he said. "You know, why me and not the other guy?"

A Lot of Other Guys

There were a lot of other guys: Jacobs eventually furloughed more than 800 of its 2,300 employees.

Today, Lorenzen is back at Jacobs, and both he and his employer say they've weathered the worst of a slump that slashed worldwide revenues in the industry by an estimated 45% from their peak three years ago.

"We're doing new things," Lorenzen said. "We're learning a new industry, a new business. It's small projects instead of large ones. We have to be more exacting, use more ingenuity and do things a little faster. It's making everyone more flexible."

Jacobs is not alone in its efforts to rebound. Two other San Gabriel Valley-based engineering and construction companies--the Parsons Corp. and C. F. Braun & Co.--also say that the worst is over and that they are attempting to dig their way out of the slump.

Among Industry's Top 50

The three firms, which are among the industry's leading 50 in the nation and do substantial domestic and international business, have reduced their collective payrolls by 2,800 workers--from the 16,900 they employed at their zenith a few years ago to 14,100 today. Engineers, the backbone of the industry, constitute up to 50% of the companies' overall work forces.

"In engineering," said Braun President Jim Kelly, "talent is all we have to sell."

The three valley companies, especially Braun and Jacobs, have always derived a substantial portion of their revenues from work on design and construction of large processing and refining plants for energy companies. Parsons, for example, handled design, engineering and construction for 60% of the oil and gas facilities at Prudhoe Bay in Alaska. And Braun last year put the finishing touches on a $2-billion oil refinery in Kuwait.

But when the energy industry nose-dived a few years ago when demand for oil began declining and plans for alternative energy projects such as coal and shale oil plants were canceled or postponed. Because the energy industry has remained in the doldrums, the three companies have had to rethink the way they had made money.

Forced to Diversity

Moreover, top executives of the three companies acknowledged, the downturn has triggered some major structural changes in the industry. Companies have had to diversify and streamline their operations in order to survive and prosper in what has become an increasingly competitive business environment here and abroad.

The shakeup has forced the three companies to seek work in areas where they previously had little or no experience: electrical cogeneration plants, sewage treatment plants, hazardous-waste recovery facilities and specialized research and production buildings for high technology industries.

Some observers say the hard times haven't ended. "I still believe the shakeout isn't over," said Mark Altman, an analyst who watches the industry for PaineWebber Inc. "Everyone is trying to downsize, to do more with fewer people and cut corporate overhead."

Parsons, the largest of the trio and the fourth-largest engineering and construction operation in the country, with $7.5 billion in 1984 contract awards, has fared the best during the slump because of its size and because it already was diversifying when the hard times hit, said Stanley Goldhaber, vice president in charge of business development.

Parsons Reported Profits

In the depths of the downturn, Parsons reported profits of more than $196 million over the three-year period of 1981-83. The Pasadena-based company showed a profit in 1984, Goldhaber said, but no longer discloses exact figures because it became a privately held company last year.

However, the payroll cuts have been deep. At one time the company had laid off 30% of its 10,000 employees. Parsons is back up to 9,000 workers, Goldhaber said, but has no plans for substantial hiring increases.

"There has always been a cycle of demands," Goldhaber said. "Build and wait. It became obvious many years ago that to ride out the cycles we had to have a leveling effect so we planned strategies for that approach."